1

Retirement 101What’s My Number?

12/28/14

2

There’s a Problem with Planning for Retirement

What will my expenses be?

How long will I live?

How much will I earn on my investments?

What will happen with inflation?

Things I don’t know I don’t know?

There are just too many variables

3

Here’s a way forwardThe 4% Rule

Generally speaking you can withdraw 4% of your assets* every yearand have a good chance of making your money last your lifetime. *Note: your WRS Pension and Social Security are required to last your lifetime.

This is not an absolute rule. There are scenarios when you

should withdraw less or could withdraw more.

4

Let’s do some MathRetirement expenses = $60,000 a year (before taxes)

60,000 x 25 =

$1,500,000

5

But Wait...It’s not that badWRS Pension

Social Security

Personal Savings

6

WRS PensionThe average WRS Pension is $25,000 a year

(Your WRS statement should arrive in the mail around April every year)

$60,000- 25,000 Pension

$35,000

Shortfall$875,000

(35,000 x 25)

http://host.madison.com/news/local/govt-and-politics/wisconsin-retirement-system-q-a/article_652e3c38-4f8f-11e0-b116-001cc4c002e0.html

7

Social SecurityThe average SS Benefit is $15,500

(Statements are sent out at age 25, 30, 35, etc. Otherwise you need to access your account at SSA.gov)

$35,000- 15,500 SS

$19,500

Shortfall$487,500

(19,500 x 25)

http://www.ssa.gov/news/press/basicfact.html

Your WRS and SS Benefits are worth over $1,000,000 in savings!

8

Personal Savings$250,000 in a TSA (403b) or WDC (457) account

$19,500- 10,000 savings

$ 9,500

Shortfall$237,500

(9,500 x 25)

9

We’re Getting There

So what can you do now?

You have a $9,500 income deficit.

10

Part-time Work

$9,500- 3,000 (pt work)

$6,500

Shortfall$162,500

(6,500 x 25)

$3,000 = $250 a month

11

Reduce ExpensesEvery $1,000 reduction in expenses means you can reduce your savings shortfall by

$25,000.Example:

You need to save $25,000 to support your iphone bill

$6,500- 1,000 expense reduction

$5,500

12

So where are we at?Taxable Income Desired $60,000WRS Pension - 25,000Social Security - 15,500Personal Savings (250,000 TSA) - 10,000Part time Work ($250 a month) - 3,000Reduce Expenses - 1,000Deficit $5,500

Shortfall$137,500

(5,500 x 25)

13

So, we have a deficit of $137,500

Further options

Increase WRS and SS benefits by working longer

Save more - $387,500 instead of $250,000

More part-time work

Spend less

14

ConclusionSo the basic framework to determine if you are on a reasonable path is:

Desired Income- Actual Income Balance x 25

15

Pay Taxes* Later

PensionTSA (403b)IRA457

Pay Taxes** Now

Roth TSA (403b)Roth IRARoth 457

No Taxes***

HSA(Health Savings Acct.)

Savings Vehicles

*Contributions are not taxed. Distributions are taxed as ordinary income.**Contributions are taxed. Distributions are not taxed.***If used for certain medical expenses.

16

WDC (457)Similar to 403b

Contributions can be taken out before age 59.5 (rules apply)

Tax Sheltered Annuity (403b)$18,000 Max. ContributionPayroll Deduction/Optional

WEA Trust(Catch-up options available)

ChoicesVariety of Mutual Funds

IRA$5,500 Max ContributionSelf-directed(Catch-up options available)

ChoicesMutual Funds,Stocks, etc.(Depends on Vendor)

Pension6.8% deducted from salary*

6.8% contributed by District*Payroll Deduction/MandatoryVesting Requirements*determined by WRS, can vary year to year

ChoicesCore

Balanced Fund,Results averaged over 5 yearsFloor on payout

Core/VariableVariable is not balanced , Results are not smoothed, No floor on payout

Pay Income Taxes Later

17

WDC (Roth 457)Similar to Roth 403b

Contributions cannot be taken out before age 59.5

Roth IRA$5,500 Max ContributionSelf-directed(Catch-up options available)

ChoicesMutual Funds,Stocks, etc.(Depends on Vendor)

Tax Sheltered Annuity (Roth 403b)$18,000 Max. ContributionPayroll Deduction/Optional

WEA Trust(Catch-up options available)

ChoicesVariety of Mutual Funds

Pay Income Taxes Now

18

ChoicesBank Account**actually you have more choices but it involves more work

HSA (Health Savings Account)$3,350 Max. Single Contribution*$6,650 Max. Family Contribution*

*including District Contributions – 2015Spending Limited to Health Expenses

(Catch-up options available)

No Income Taxes

19

Thank youQuestions or Comments

Jonathan Marin

jonmarin@yahoo.com

Remember to consult a professional if you’re thinking of retiring.

You can find 403b information at: http://www.weabenefits.com/

This presentation is also posted onwww.tomahawkea.org

You can find 457 information at:https://wisconsin.gwrs.com/login.do